Non-Linear Business Logic
Paul [email protected]@paulmccabester
Trained as a sociologist
Managing Director of Advertising Agency - BMW/ Mini, Groupe Danone, Hyundai,
innocent, Mars/ Masterfoods, Pernod Ricard, Tesco, UNICEF & Warner Music
Business Consultant in Transformation - focus on digital technology and sustainability as
catalysts for change
Educator in Transformation & Innovation - Hyper Island & Strelka Institute of Media,
Design & Architecture (2 of Domus Top 100 Design Schools)
Paul McCabe
Your name
Your company
What industry are you in?
Your turn
Digital technology as a disruptor
The nature of value
Different approaches to value creation
Emerging value drivers
What we’re going to explore
Technological innovation is behind social change
Hunter/ Gatherer
Agriculture/ Feudal
IndustrialRevolution
Digital Revolution
We are living in a very seismic time
2 tectonic plates converging and causing friction
DISRUPTIVE AMBIGUITY
Most businesses, organisations and systems were designed for a less complex world
DISRUPTIVE AMBIGUITY
Most businesses, organisations and systems were designed for a less complex world
Non-linearity is causing a complex restructuring of society:
- Need to embrace ambiguity, understand it, listen to it- How to transform and design for transformation
DISRUPTIVE AMBIGUITY
Most businesses, organisations and systems were designed for a less complex world
Non-linearity is causing a complex restructuring of society:
- Need to embrace ambiguity, understand it, listen to it- How to transform and design for transformation
Industries and organisations are struggling as they are unable to adjust to what is to them an ambiguous world
DISRUPTIVE AMBIGUITY
Most businesses, organisations and systems were designed for a less complex world
Non-linearity is causing a complex restructuring of society:
- Need to embrace ambiguity, understand it, listen to it- How to transform and design for transformation
Industries and organisations are struggling as they are unable to adjust to what is to them an ambiguous world
Deep institutional & cultural resistance to change:- As disruption increases so to does resistance
DISRUPTIVE AMBIGUITY & THE CONSUMER
New technologies are the tools for change
DISRUPTIVE AMBIGUITY & THE CONSUMER
New technologies are the tools for change
A social revolution:- In the face of institutional failure people are getting what they want from each other- Greater freedom, empowerment, mutualism, diversity & efficiency
DISRUPTIVE AMBIGUITY & THE CONSUMER
New technologies are the tools for change
A social revolution:- In the face of institutional failure people are getting what they want from each other- Greater freedom, empowerment, mutualism, diversity & efficiency
Companies need to design around the needs of the consumer rather than the needs of the orthodoxies of an industrial world
Contours of a new human being emerging
NEW:life valu!
belie" & priori#! behaviou$
ways of workingways of being%la#onships
frien&hips and social pat'erns
hobbi! & ac#vi#!
Contours of a new human being are emerging
We’re on a threadmill
“Science and technology have progressed to the point where what we
build is only constrained by the limits of our own imaginations.“
—Justin Rattner, Intel CTO
Human evolution
Technologyrevolution
“Science and technology have progressed to the point
where what we build is only constrained by the limits of our own imaginations.“
—Justin Rattner, Intel CTO
Human evolution
Technologyrevolution
As a business how should we view innovation - what is our
vision for the future?
We’re on a threadmill
Lifespans
1937
75 yrs
2012
15 yrs
S+P 500 COMPANIES
By 2030 more than 75% of the S&P 500 will be companies that we have
not heard of yet
(Yale University)
Lifespans
1937
75 yrs
2012
15 yrs
S+P 500 COMPANIES
Since 1984, 69% of the companies in the UK FTSE 100 have been taken over, gone bust, or slipped into the second rank
Lifespans
1937
75 yrs
2012
15 yrs
S+P 500 COMPANIES
Who is likely to disrupt your industry?
The internet as a black hole
Communications
Photography
News
Higher Education
Broadcasting / TV
MusicTravel
Advertising
Hollywood
Retailing
Banking
Health
Publishing
Transforming Business
Motors
Legal
Define themselves by the product they produce
See the internet & technology as a threat
Change is a bad thing
They can control customer behaviour & assimilation of technology
What made us successful in the past will make us successful in the future
We can take our customer for granted
More important to manage existing revenues than look for future ones
More important to manage threats than opportunities
Competition rather than collaboration
Harmful business beliefs
Subjective
Worth
Negotiable
Fluctuating
Usefulness
Desirability
– Warren Buffet
»Price is what you pay. Value is what you get.«
Internetisation exponentially impacts customers’ opportunities to get from a to b in the least annoying way
Business Logic: What we’re trained to believe in
Research& Development
Manufacturing Distribution SalesMarketing Product
Business Logic: What we’re trained to believe in
Research& Development
Manufacturing Distribution SalesMarketing Product
The value is created here. And stored here.
Business Logic: What we’re trained to believe in
Research& Development
Manufacturing Distribution SalesMarketing Product
The value is created here. And stored here.
R&D Prod Dist SalesMktg Product Desired Outcome
What the customer buys and considers “value” is not the product, but the result it generates.
Product Focused Approach to Value Creation
An output - what customers get out
What the customer buys and considers “value” is not the product, but the result it generates.
Happens in the customer space
Accumulates over time
A holistic experience
Helping people get to their desired outcome
Product Focused Approach to Value Creation
Make, Sell, Distribute stuff
Make Products & Work in Silos
Linear definition of industry (we make/sell cars)
Obsessed with market share
Lock-in customers
Squeeze costs out of the chain to drive profitability
Make, buy, rely on technology for advantage
Meet expectations
Innovation = Incremental improvements of products & processes
Just more of the same.
More products, more services. More
brands. More markets.
Product Focus
Helping people get to their desired outcome
X X X X X X X
The Dinosaurs
100% of CD sales?
X X X X X X X
Product v Customer Focus Going the extra mile to land value in the customer space
X X X X X X X
Product Category / Industry Definitions
Market Space
Shape and Dominate a Future Market Space
Market Space: Based on a vision
Market Space: What’s your vision of the future?
Market Space: Where could they take the brand?
Market Space: Where do they operate?
X X X X X X X
What industry are they in?
What industry are they in?
What industry are they in?
What business are you in?
VALUE (OUTPUT)
Great Music Experienceanytime, everywhere
VALUE (INPUT)
Records (LPs, CDs, mp3s, etc)
What business are you in?
VALUE (OUTPUT)
Accelerating Running Performance
VALUE (INPUT)
Running Shoes
VALUE (OUTPUT)
Life-long Health Management
What business are you in?
VALUE (OUTPUT)
PersonalisedCoffee Experience
VALUE (INPUT)
Coffee
What business are you in?
VALUE (OUTPUT)
Life-long Oral Health & BeautyVALUE (INPUT)
Toothpaste
What business are you in?
VALUE (OUTPUT)
Personal Mobility ManagementVALUE (INPUT)
Cars
Value = Input Value = Output
Records (CDs, MP3s etc)
Running Shoes
Tooth Paste
Coffee
Great music experience -anytime, anywhere
Lifelong health management
Lifelong oral health & beauty
Personalised coffee experience
Cars Personal mobility management
Noun (Object) Verb (Activity)
Records (CDs, MP3s etc)
Running Shoes
Tooth Paste
Coffee
Great music experience -anytime, anywhere
Lifelong health management
Lifelong oral health & beauty
Personalised coffee experience
Cars Personal mobility management
How big a role do you want to play for the customer to help them get to their desired outcome?
Market SpaceArticulates what customers want
Provides an integrated customer viewpoint linking benefits across products, companies and industries
Comes from convergence not linear trends
Defining not confining
Direct thinking, strategy and resources
Provide value for customer and enterprise
Product vs Customer FocusFundamentally different ways of approaching the value creation process
Make, Sell, Distribute stuff
Market Share
Lock in
Industrialisation
Make, buy, rely on technology for advantage
Meet expectations
Innovation =Incremental improvements of products & processes
Product Focus
Provide Integrated Experience
Shape & Create Market Spaces
Lock on
Personalisation
Integrate technology into Customer Activity Cycle for advantage
Shape expectations
Innovation =Doing things with and for customers that change the rules in the market
Customer Focus
DesiredOutcome
Market Space
CustomerActivityCycle
Product vs Customer FocusFundamentally different belief systems
Input
Ownership
Competition
Short term profits
Next in line
Segments
Product Focus
Output
Access & usership
Partnering & co-operating
Customer lifetime value
End user
Individuals
Customer Focus
DesiredOutcome
Market Space
CustomerActivityCycle
Product vs Customer FocusDifferent ways of being
Cut costs
Self serving
Short sighted
Risk averse
Hierarchial
Proof driven
Management
Add value
Breakthrough value
Shape expectations
Change markets
Vision for the ecology
Purpose beyond making money
Leadership
Customer Focus
DesiredOutcome
Market Space
CustomerActivityCycle
Product Focus
Solve your user’s problem
Not the brand’s
When it comes to digital...
Invest in your user
Not your brand
When it comes to digital...
Punch CardsElectronic Typewriter
NASA FlightsFloppy Disk
Speech RecognitionRetail Scanner
PCLaser Surgery
1914 First disabled employee1943 First female VP
1946 First black salesman1952 Locate in Silicon Valley5 employees won Nobel Prizes
Open door policyLife assurance
40 hour work week
Enlightened & Innovative
Punch CardsElectronic Typewriter
NASA FlightsFloppy Disk
Speech RecognitionRetail Scanner
PCLaser Surgery
1914 First disabled employee1943 First female VP
1946 First black salesman1952 Locate in Silicon Valley5 employees won Nobel Prizes
Open door policyLife assurance
40 hour work week
Leading Technology Integrator
Lost $16,000,000,000 in the early 1990’s& faced bankruptcy
The new value chain
Market Space
THE
DesiredOutcome
CustomerActivityCycle
Fuelled by technology & data
Market Space
THE
DesiredOutcome
CustomerActivityCycle
The new value chain is an eco-systemOne Unified OfferingBranded Integrated Experience
i
i
i
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pp
p
i
i
i
i
i
p
ppp
p
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CustomerActivityCycle
Market Space
THE
DesiredOutcome
Market Space
THE
DesiredOutcome
CustomerActivityCycle
PREDeciding what
to do
DURINGDoing it
POSTKeeping it going
THE
DesiredOutcome
Customer Activity Cycle
PREDeciding what
to do
DURINGDoing it
POSTKeeping it going
THE
DesiredOutcome
Customer Activity Cycle
Putting value in
Taking waste out
1
Getting in sooner
Staying in longer
2
Add value by
PREDeciding what
to do
DURINGDoing it
POSTKeeping it going
THE
DesiredOutcome
Customer Activity Cycle
Putting value in
Taking waste out
1
Getting in sooner
Staying in longer
2
Add value byMind The Value Gap
Things customers don’t want
Things not done
Things done badly
Things done expensively
Things done inefficiently
Things done disconnectedly
Waste of time & energy
Environmental waste
Human waste (health, FUDs)
Value Gaps
Short AND long term
What does this mean for marketing?
The role of marketing
PREDeciding what
to do
DURINGDoing it
POSTKeeping it going
Customer
Lock On
To add value through out the
CAC and support a better, more
integrated, customer
experience
Value creation & internet customer logicMarketing solutions make a greater contribution to the overall customer experience
PREDeciding what
to do
PREDeciding what
to do
DURINGDoing it
POSTKeeping it going
From Demand Creation To Value Creation
ProductDesired
Outcome
Customers are getting the Value of a Product long after purchasing it (and over time). The
Internet is accelerating the Value Creation by also accelerating Waste Reduction.
Marketing activities that Add Value through out the Customer Activity Cycleto end-users are more efficient.
Marketing activities that add value through out the CAC to end users are more efficient
Time
No. of People
Customer Focused Marketing
Product Focused Marketing
Bought Owned Earned
Controlled by Brand
Controlled by Customer
Customers are more likely to take part in
Value Creation (rather than Demand
Creation)
You know you succeed when
1. You are The Customers’ first choice
2. They look to you to solve their problems
3. They share confidential information with you
4. They talk to you about their plans
5. They accept your advice and ideas
6. The discuss options with you (as opposed to just price and discounts)
7. They give you feedback, good or bad (before you ask)
8. The recommend other to you (and you to others!)
9. They trust you to take decisions on their behalf
10. They want you to succeed
Customer Lock
Further Reading
What is your customer’s Desired Outcome?
(Based on output rather than input)
What is your Market Space?
(How far are you prepared to go to help them get to their desired outcome?)
In one sentence each
Exercise - What industry are you in?
Track 3Emerging Value Drivers
Paul McCabe@[email protected]
Track 1: Product Focused
The sale is the end transaction, where value is delivered
Self-serving model focused on achieving high volume sales at the lowest cost
Focus on supply chain cost efficiency
Innovation is based on incremental improvements in products and services
Track 2: Customer Focused
In addition to T1 cost chain efficiencies, provides value added services that differentiate
Value is an output not an input
Focus not just on product or service but how it lands in the customer space
Based on partnerships, collaboration and horizontal thinking
Innovation is focused on doing things with and for the customer that change the rules of the market
The internet creates new ways of landing value in a more holistic and integrated way
Market SpaceTHE
DesiredOutcome
CustomerActivityCycle
Track 1
Input Focused
Linear
Product Focussed
Red Ocean
Track 2
Output Focused
Non-Linear
Customer Focussed
Blue Ocean
Fundamentally different set of core beliefs and behaviours
Product Focused Cultures - Linear Logic Customer Focused Cultures - Non Linear Logic
How do we get costs down What costs can we eliminate because they add no value to our customers
Our aim is to get ‘high volume’ unit sales Our aim is to deliver on-going ‘high value’ to our customers at low delivered costs
How do we cut costs/ hold margins to maintain profitability How do we better serve our customers to get a better share of their spending
How do we increase our market share What will it take to commit the customer we want for a lifetime
We serve customers who are next in line in the distribution chain
We need to focus on end-user, if we are to jointly serve our customers
What is the cost of the activity we do What is the opportunity cost of the activity we do
The object is to sell high volumes to get economies, thereby making profit targets
The object is to optimise the operations of the whole distribution channel so that everyone will be successful
We are responsible for our own activities We are jointly responsible for activities that create and deliver value to our customer
Our part matters most (function, division, department, unit, country, role in ‘cost chain’, etc)
The good of the whole matters most
Met
Unmet
Present Emerging Future
Value drivers
Met
Unmet
Present Emerging Future
Value drivers - why choose a brand?
What is your story and how do you tell it?
Obesity
Carbon emissions
GM Foods
Minority rights
PollutionHealthy water
Corporate tax Hygiene
Environment
Fair trade
Freedom of Expression
Worker’s rights
Animal welfareCivil liberties
Track 3: Society Focused
Creating a Win = Win = Win
Work in an ecosystem where everyone is winning in a sustainable way of doing things
Goes beyond creating customer value by taking responsibility in society. Not just concerned with whether value lands, but that it is done ethically & responsibly
Still an emerging issue, but rapidly. It is the future (lead and iron)
Behave ethically. Behave responsibly. Behave sustainably
Track 3: Society Focused (cont’d)
We can’t pretend we do good
The internet fuels transparency - we will be found out
Networks drive interactivitism - gives access and amplification to people that had none before
Hypocrisy is the new evil
Identifying wastage - eliminating things that are questionably ethically or socially
Adding value to society through product innovation.
Ethics v Morals
Morals are easy and uninteresting
The bible. Condoms. HIV
Ethics are more engaging
Internet helps us police them
Ethics as entertainment
Track 3: Society Focus & Ethics
What’s right or wrong is discursive, cultural and contextual
Take a stand. Explain benefits
If you are pro-animal testing come out and say itWork with animal rights groups to set standards & best practice Face up to grey areas or they will bring a brand down (child labour, sweat shops, animal testing)
Fight for what you think is right, even if destructive or short term
What we say and do needs to be aligned (integrity v hypocrisy)
Track 3: Checklist
Do good
Be fair
Be decent
Make things that last
Sustainability Complexity & Resources Multi-generational
Emerging Markets Life Values Power
OS1 OS2 OS3
Customer Next in Chain End users User, Community, Planet
O!ering Product or Service (the means)
Integrated User Experience (the outcome)
Quality of Life & Purpose (why)
Aim Increase Market Share of Silos
Dominate Market Space with Partners
Prosperity of Eco Space
Objective Increase Customer Lock-in
Increase Customer Lock-on
Reduce Customer Lock-out
Horizon Immediate Profit (short-term)
Over time, even Lifetime Profitability
Multi-generational
Need Ownership – replace often
E!ective User-ship over time
Empower through Access (wherever, whenever, whatever)
Reach Segment IndividualA"nity Groups:
Aggregate, Share, Pool
Track 1Product Focussed
Track 2Customer Focussed
Track 3Society Focussed
Thank You
Paul McCabe@[email protected]